Robust domestic macroeconomics could support NSE Nifty 50 scale 17,500 and take the S&P BSE Sensex to 58,300 as India’s economy recovers from the covid slump, stated domestic brokerage firm ICICI Direct. “With the peak of the Covid resurgence behind us, increasing pace of vaccination domestically and calibrated state-specific unlocking underway, we expect economic activity to bounce back sharply in the remaining nine months of the financial year 2021-22,” the brokerage firm stated in a report. Benchmark indices have currently surged greater helped by sturdy corporate earnings. The target set for Nifty implies a 10% upside possible from existing market place levels.
Economy bouncing back
Headline indices showed resilience for the duration of the second wave of covid-19. The current rally in indices was aided by encouraging corporate earnings in the January-March quarter, led by the upswing in crucial commodities costs and sturdy underlying demand prospects. Further, Good and Services Tax (GST) collections continue to stay above the Rs 1 lakh crore mark standing testament to the robust domestic macroeconomics, according to the report. Foreign institutional investors (FII) have also resumed investing in India, turning net purchasers in June 2021 (MTD inflow at US$2.1 billion) against promoting activity observed in April 2021 and May 2021.
Nifty earnings to develop 24% CAGR
Analysts at ICICI Direct stated their positive view for domestic markets is additional reinforced by the step-up capex by the government, which will generate a multiplier impact on the economy. “We expect the present broad-based up move in markets to continue, with small-cap and midcaps leading the gains,” they added. Stellar January-March quarter benefits have led ICICI Direct to upgrade earnings estimates to the tune of ~7.5%. “Nifty EPS is now expected to grow at a CAGR of 24.2% between FY21- 23E. Assigning the same PE multiple of ~22x to FY23E earnings, our resultant Nifty target is at 17,500 with equivalent Sensex target at 58,300,” the report added.
Watch these sectors
Over the next couple of years, ICICI Direct believes double-digit earnings development will be led by the automobile sector (base impact), capital goods space and index heavy BFSI space, which also contains the insurance coverage sector. Meanwhile, IT and pharma space continue to stay the favoured structural plays in the market place.